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George D. Holliday, Technology Transfer to the U.S.S.R. 1928-1937 and 1966-1975: The Role of Western Technology in Soviet Economic Development. Boulder, Colorado: Westview Press, 1979, 225 pages, $18.50. Even before the Carter administration retaliated against the Soviet invasion of Afghanistan by embargoing "high-technology" exports, the motivation, purpose, and consequences of the greatly accelerated Soviet trade with the West over the last decade and a half had become a contentious issue in the debate over detente. In an extremely informative study focused on the Soviet automotive industry, George Holliday, a Library of Congress research specialist on international trade, provides the data and an interpretive framework that can help to sort the sense and nonsense in the contending arguments.
Anthony Sutton, the author of the massive three-volume study Western Technology and Soviet Economic Development (Stanford, California: Hoover Institution Press, 1968, 1971, 1973) is the most extreme, and perhaps most influential, proponent of the theory that the upsurge in trade is but the repetition of a cyclical pattern in Russian history observed most recently during the Five-Year Plan. It is argued that the Soviets pursue a deliberate policy of autarchy interrupted by occasional expedient resorts to borrowing foreign technology in order to catch up with the West. Adherents of this viewpoint also maintain that trade with the West provides the Soviet dictatorship with an alternative to internal economic and political reforms and thereby strengthens totalitarianism. Some go so far as to assert that if the West would simply withdraw this indispensable prop, the system would either collapse or be forced to liberalize.
Despite inundating the reader with a staggering mass of information, Sutton does not present an analysis of the net contribution of Western technology that can even remotely support his contention that Western technical assistance was "the major causal factor" in Soviet growth from 1928 to 1945 without which the U.S.S.R. would not have been able "to make any economic progress." (quoted, p. 57, p. 4) This claim is refuted by the careful research of Richard Moorsteen and Raymond P. Powell (The Soviet Capital Stock, 1928-62, Homewood, Illinois: Richard D. Irwin, 1966) which shows that Soviet economic growth during that period should be attributed primarily to increases in labor and capital inputs rather than to increases in productivity or technological progress. Technological borrowings, as Holliday observes, were no doubt important in certain sectors, but their contribution to the total process of growth was by no means decisive.
Holliday does find some, limited evidence to support the mirror-image theory that the Soviets pursued technological and economic independence in the inter-war period as protection against a "hostile capitalist encirclement," but have not, in general, followed a policy of autarchy. Increased East-West trade, according to this view, is explained by current Western governments repudiating their old policies. Holliday cites economist Michael Dohan who persuasively argues that the sudden and sharp cut-off of Soviet imports in 1933 was unplanned, the consequence of dramatically worsening Soviet terms of trade, declining hard-currency reserves, the unavailability of credit, and depression-sparked moves towards autarchy by capitalist countries. But the essence of the second theory, the notions of Soviet policy continuity in the Stalin and post-Stalin periods and the "hostility" of the capitalist encirclement, is too extreme for anything except propaganda or apologetics. Dohan’s research points to the anarchy of capitalism, not the hostility of Western governments. Holliday adds that the U.S.S.R. still enjoyed tolerably good relations with Germany and improving relations with the United States when it sharply reduced its trade. He argues that an overlooked factor in the curtailment of economic ties with the West was the naive expectation of Soviet planners that their economy could through a single dose of borrowing easily and rapidly catch up with and surpass Western technology. There was, moreover, a predilection towards self-sufficiency among Soviet planners and politicians during the late 1920s and 1930s.Thus, the cutback, if not its timing and extent, was probably an inherent tendency in the logic of the Stalinist system.
Most satisfactory in Holliday's estimation is the theory that the present Soviet leadership has adopted an orientation towards the international economy that differs fundamentally from the Stalinist strategy of autarchy. Holliday finds firm evidence of a new, long-term policy of continuous technical interdependence with the West in the statements of Soviet leaders and economists and in a most persuasive case study of the automotive industry.
Using a general model of the technology transfer process, Holliday elucidates the new growth strategy, its requirements and implications. Not only has the growth of Soviet productivity been comparatively low, but it is declining. With a slowdown in the increase of the labor force and difficulties in maintaining high rates of capital investments compounded by growing numbers of claimants, Soviet officials and planners have, since the mid-1960s,been increasingly compelled to develop a new extensive growth model capable of yielding more output per unit of input. Foreign trade plays a central, though not exclusive, role in the new strategy. Concern about the slowness of domestic technological progress has led to a willingness to be actively involved in the international division of labor and the abandonment of many theoretical assumptions and practices of the Stalinist model. New attitudes are not enough alone. They must be accompanied by parallel and potentially far-reaching institutional innovations. Because successful technological transfers usually require "active" relationships between technology transferers and recipients, the most fundamental change required is the development of new transfer mechanisms which promote closer long-term interactions between Soviet enterprises and Western firms. The changes have also included an erosion of the foreign trade monopoly and subtle foreign-trade oriented changes in domestic industrial organization. A concomitant of the new policy is that "Soviet political leaders are willing to accept greater political and economic costs in order to reap the benefits of expanded commercial relations with the West." (p.185) The secondary and ripple effects of the new strategy represent a central dilemma for the Soviet authorities. If the change in Soviet policy is fundamental, the recognition of it is still widely resisted. Although ideological obstinacy is partly responsible, other factors are perhaps more important. The issue has been approached in a particularly cavalier and superficial manner. In particular, the formula that foreign technology is the functional equivalent of internal reforms is not as obvious and undeniable as it seems at first glance. To be sure, some Soviet officials may well see Western technology as a means of avoiding internal reforms that are ideologically suspect or opposed by powerful bureaucratic interests. But since the successful absorption of foreign technology will require broad changes in Soviet domestic institutions, trade with the West is neither a perfect nor even a sufficient substitute for internal reforms. In the long ran, it may actually be a stimulus to reform. The process of technology absorption cannot be quarantined in a narrow enclave within the Soviet economy without severely handicapping and retarding economic growth. In the absence of internal changes, imported technology will operate less efficiently than abroad and, mom importantly, it will make no significant contribution to closing the lag in Soviet productivity and innovation. The same factors which make the generation and diffusion of domestic innovations so difficult also make the absorption of foreign technology inefficient. (Moreover, since the importation of Western technology would have to greatly expand over current levels in order to overcome the slowing of the Soviet economy, the concerns of the Sutton school are somewhat premature.) Given a positive rather than inverse relationship between expanded ties to the world economy and internal changes in the Soviet economy, it is not at all surprising that a vigorous, on-going debate about the organization and structure of the Soviet industry has emerged in recent years. The debates of the 1960s about decentralization, the market and planning have become intertwined with the debate over the role of the U.S.S.R. in the world economy with the reformers, in general, being supporters of expanded ties.
The ace-in-the-hole of the autarchy theorists, the fear that the current technological borrowing is but the prologue to another withdrawal from the world economy is countered by Holliday's observation that while the growth of hard currency deficit resembles the Soviet experience of the 1930s, the current response of allowing indebtedness to grow while developing export industries does not. This, of course, is what should be expected if the Soviet Union has entered into a relationship of long-term interdependence with the world economy.
Although Holliday does not directly discuss Western governmental policies, his study makes a major contribution to the debate over whether it is possible and desirable to renew the detente with the Soviet Union. In the long run, his suggestion that "an understanding of different Soviet proposals for solving the problems of insuring domestic technical progress would provide a better basis for judging the stability of the current leadership's policy" is of critical importance. (p. 185) Such an understanding is a necessary prerequisite to an informed discussion of the possibilities of using trade as a lever to induce Soviet behavior in international affairs and the observance of human rights. For, "there is some level of costs, particularly in the political realm, which the Soviet leaders would find unacceptable. If the international or domestic situation were perceived by the leadership to be extremely threatening, a more isolationist posture might be adopted." (p. 185)
The chain of events set in motion by the Soviet invasion of Afghanistan could well lead the Soviet authorities to relapse to a more isolationist economic posture. It could also aid the political ascendancy of hardliners who fear the corrosive impact of relations with the West on the regime's ideological legitimacy and structural coherence. These outcomes are the more likely should pressures mount in the United States to transform the current ban on trade from a temporary policy designed to achieve limited and defined ends into a permanent centerpiece of American policy towards the Soviet Union. This course, leaving aside the practical obstacles to getting other Western countries to go along, is premised upon an interpretation of Soviet behavior that, as Holliday shows, is fallacious, not only overstating the historical contribution of Western technology to Soviet growth, but also denying the marked shift in Soviet policies since the 1960s. Rather than acting on stereotyped misconceptions, a careful and imaginative study of the facts and possibilities is needed. Anyone interested in understanding the contemporary Soviet Union cannot afford to neglect or underestimate the importance of the new orientation of participation in the international economy. Although little noticed (and subject to semi-hysterical misunderstandings), it is already a leading characteristic of the post-Khrushchev period. As a marked deviation from the Stalinist model and a tendency which has probably not yet found full expression, it can be expected to be a critical factor in the future evolution of the Soviet Union.
New International Review Summer 1981, Volume Three, Number Two
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